How Can A Single Mom Make Life Insurance Work Harder for Her?

My friend, Tara*, didn’t expect to be a single mom. She had a good job, a home of her own, and a husband she loved when she had her children. But after struggling for years to make the marriage work, she admitted it was time to move on. She and her husband Carter split on fairly good terms. The children lived with her, but Carter was supposed to provide additional support and care.

Unfortunately, shared care didn’t work very well. Carter just wasn’t holding up his end. Tara was struggling to care for their children and maintain a challenging job which provided most of the family’s income. She and her mother worked out an agreement to live together and share childcare and chores. It made sense for both of them since her mother, Susan, was single, close to retirement, and only had a modest retirement fund. Besides, Susan loved spending time with her grandchildren.

They moved in to a bigger house with room for Susan to have an area to call her own. The whole family felt that having Dad involved was important but now the stress was off - Grandma could pick up the slack if Dad didn’t show up. Tara and her mother figured that the challenges of living together as adults far outweighed the challenges of living alone.

The kids loved having the extra attention as well as a freer schedule to play sports and visit friends since Grandma could be counted on to get them from place to place. Tara was relieved to have support she could rely on. She was able to spend the time at work that her job demanded without worrying about who was taking care of the kids. And coming home to a hot meal was heaven.

However, Grandma Susan was concerned about one thing. If Tara should pass away before the kids were grown, Susan wouldn’t be able to keep the household together. She finally talked to Tara about getting some life insurance to protect Susan and the children if the worst happened. They reached out to Retirement Safety Zone for advice.

Tara was concerned about cost and Susan was concerned about finding the best solution for everyone. We looked at two solutions. The first one, term life insurance, satisfied Tara’s concern about cost. It’s the simplest and cheapest method to protect her mother and children if she should pass away first. The main drawback would be that the policy might expire before her mother passes away. However, Tara was young enough to qualify for a 30 year term which would mean her mother would be 100 years old before the policy expired. Almost certainly long enough in this situation.

However, Susan was immediately drawn to the second solution, permanent life insurance with an option to build cash value. An Indexed Universal Life (IUL) insurance policy would not only protect the home throughout Tara’s life but also build cash that could be withdrawn to pay for the children’s college tuition. Learn more about how an IUL can help by reading this blog, Sometimes Time is on Your Side.

In the end, both Tara and Susan decided building a college fund while at the same time protecting their home for Susan and the children was actually the best value. They wouldn’t need to worry about how long the policy lasted or have to pay for a separate 529 college fund for the kids. Not only that, but the same policy could add much needed income to Tara’s retirement.

Strategy At A Glance

The two solutions to protecting the family home for Grandma and the children each have they’re strengths. The term life insurance option offered the lowest premium to create a secure home for her mother and children even if Tara passed away too young. If you’re considering that solution, consider how long of a term policy you could qualify for and whether that policy would expire too soon.

The second solution, the one that made the best overall sense for Tara and her mother, Susan, was an Indexed Universal Life policy (IUL) since it would last for Tara’s lifetime plus could provide college money for the children (money not considered by the college when they apply for financial aid) and additional income for Tara’s retirement.

Next Steps

If you’re in a similar situation, please click the booking link to set a time for us to talk about choices you can make to fit your unique situation. Together, we can find a solution to that works with your budget yet gives you more of the security you’re looking for.

If you’re curious about other ways to strengthen your family’s financial security, subscribe to our newsletter below.

*No real names used. We’ve changed the names to protect our clients’ privacy.

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